Corn exports for the crop year that began Sept. 1 are 50% lower than they were at this stage a year ago, according to U.S. Department of Agriculture data. They are also 55% below the recent five-year average…

[The high prices have prompted] corn buyers to look elsewhere. In recent months, buyers, including Japanese importers, have turned to less-expensive sources such as Brazil, which ranks behind only the U.S. among corn exporters.

Farm-equipment manufacturer Deere is also benefiting, Credit Suisse analyst Jamie Cook noted in a research report today after a meeting with company mangement. He writes:

…the drought in the US helped commodity prices and favorable financing (currently at 2.5% going to 3.0% in 1H’2013 and 3.5% in the 2H’13) has resulted in increased demand for farm equipment. Deere believes it is well positioned to gain additional share as it can offer customers a complete product line, unlike the competition. Deere has also localized a number of its products as well, resulting in market share penetration.

It’s not all good news for Deere, however. Cook notes:

With regards to margins, products carry similar margins to the US; however, mix is unfavorable, as tractors in this region tend to be smaller horsepower compared to the US. Also, Deere is carrying higher depreciation and amortization related to newer facilities.

Overall, though, “Deere should benefit from investments in Brazil and China where it is currently incurring costs related to investment and not yet benefiting from sales leverage.” When the spending stops, the company should get a “meaningful cash flow” boost, Cook says.

Shares of Deere have gained 11% this year after dropping 0.4% to $85.85 today.

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